The Medical Cost Control Debate Lacks Value

The debate in California following the most recent rate filing by the state's Workers' Compensation Insurance Rating Bureau (WCIRB) is whether utilization review (UR) is worth the expense.

Medical costs have increased 40% since lawmakers made utilization review (UR) mandatory in 2003, the WCIRB said in its 2012 pure premium rate filing.

Insurance Commissioner David Jones and his chief actuary, Ronald Dahlquist, both asked at a rate hearing held in San Francisco on Tuesday whether this means utilization review isn't working, and that is a valid question especially in light of the fact that UR costs have increased dramatically.

Dave Bellusci, chief actuary for the Rating Bureau, responded that while UR is a significant cost driver and one of the most rapidly growing components of medical costs since 2005, that doesn't mean it isn't working.

Bellusci's statement brings out one of the faults of the current structure of defining medical costs by the WCIRB - that UR is a medical cost. I disagree.

UR is an employer/carrier administrative cost. While it is a component of medical cost control, it is a voluntary cost control measure that is instituted at the employer/carrier level, not at the physician/medical delivery level.

A component that was not discussed relative to whether UR works is the impact UR might have on other claim costs - whether delays in claims management caused by UR denials and then subsequent appeals adds to the costs of indemnity, both temporary and permanent, and to later medical costs.

Bellusci said he expects UR costs to level off, even though that trend hasn't appeared yet in data collected by the WCIRB. He also said he agrees with the recommendation in a Rand Corp. study published by the Commission on Health and Safety and Workers' Compensation (CHSWC ) in October that suggests studying whether employers are getting the maximum benefits from UR and how frequently treatment decisions should be reviewed.

Another cost driver that is part of the WCIRB equation on medical costs, and which should be attributed to administrative costs, is medical bill review. 

Both UR and bill review are big businesses and generate giant revenues for these service provider owners. I think that both cost components need to be analyzed for their relative benefit to the work comp community, and whether there are better methods for maximizing the dollar value of medical services.

Note that I said "dollar value" of services. I am not convinced that controlling costs on an itemized basis is the best way to determine whether any particular medical constituent is being fairly reimbursed for services or goods provided.

The state should follow the recommendations of CHSWC and contract with Rand Corp. to study UR, and bill review, on a global claims cost basis, to determine if in fact these services are returning value to the community, if so how much and what that value is, and whether there may be other more efficacious methods of looking at the relationship of medical care delivery in the total claim cost equation.

WorkCompCentral

Does a "Culture of Caring" Have A Place in High Turnover Businesses?

The California Workers' Compensation and Risk Management conference that began on Monday and ended on Wednesday in Dana Point, California, had many sessions about claim management from various levels - macro to micro.

The overall theme in each of these claims management sessions was communication: early and frequent communication with the injured worker and the relay of that information to various sources tasked with management of the claim.

While most of the presentations on communication focused on gathering and timely dissemination of information, one aspect that was lightly touched on and which I think makes a bigger difference in claims management is that the communications with the injured worker reflect a "culture of caring."

The "culture of caring" was coined by author and New York broker Adam Friedlander in his book "How to Save Big on Workers' Compensation" (which I reviewed in an earlier blog post).

Friedlander argues that, "If you need to get an employee back to work, you need to take care of that with the employee by the culture you establish and by the follow-up you do that shows you want the employee back."

Early return to work is almost universally acknowledged as the single biggest factor in controlling claim costs.

Friedlander's axiom may not be entirely applicable to a business with traditionally high employee turnover, such as a fast food business that relies on low wage, young labor.

At the conference, Michael W. Simmons, El Pollo Loco's director of risk management, said the chicken-fueled fast food franchise does its best to ensure that it never breaches its $250,000 deductible by using a team to quickly react to each claim within the first three days of the accident, before the case ever reaches an attorney.

"There is a very fine line and a very delicate balance there where we want to trust our employees, but clearly we have also got to verify their intentions," Simmons told our reporter. "Of our employees, we have 165 restaurants, 4,600 employees, and about 120% turnover at that employee level. For us, we are seeing new employees of up to 6,000 a year. So for us, it is very important that we trust but verify."

I don't know what the experience is for a fast food chain such as In 'N Out Burgers, which boasts one of the highest pay and benefits schemes for its employees and one of the lowest employee turn over rates in the fast food industry. Does the way In 'N Out Burgers treat its employees also result in lower workers' compensation costs?

I did some quick research to see if I could find some answers to this, but couldn't get the answers in time for my blog deadline. I'm hoping that someone from In 'N Out Burgers can provide me with some comparison data that would give me an indication of whether or not overall employee treatment has an effect on workers' compensation experience.

WorkCompCentral

The Passing of Judge Greenblatt and My Introduction to Comp

Rather than my daily rant about workers' compensation, I am taking today to remember something special - the day my professional and personal life changed irrevocably; the day I became indoctrinated into the California workers' compensation system and the work comp industry.

I got the news late yesterday evening that former California Workers' Compensation Judge Larry Greenblatt had died.

Judge Greenblatt served as the Presiding Judge at the Ventura and Agoura Boards and after his retirement, as an annuitant in Marina Del Rey.

Judge Greenblatt was also my introduction into workers' compensation, and what an introduction it was.

I was a very young lawyer at the time, having just been admitted to the bar several months earlier. My focus for the law firm, Miller & Folse, at the time was real estate and business litigation. The firm's dedication was workers' compensation - primarily defense but we also handled many applicant cases too. The firm's partners, John Miller and Rene Folse, wanted to expand the scope of practice of the firm so I was the youngster that was going to help them do that.

I was having a nice quiet afternoon in the office, reviewing a case file and preparing answers to some interrogatories when Miller came into my office with a big fat accordion file.

"David, I don't have any lawyers here except for you and I need you to take this file down to the Ventura board to get this settlement approved," he said. "Don't worry, everything is taken care of. The settlement papers are all signed, the applicant's attorney has approved and the judge is waiting for you."

Okay - sounded simple enough to me. Miller assured me, "It's no problem, a piece of cake. This is routine in workers' compensation and you don't need to know anything. Just get the judge to sign off on the settlement."

I wrapped a tie around my neck and headed on down to the Ventura board, which at the time was located on Ralston Street just off Victoria (I had a tough time finding it on this first occasion - it later became a very well known venue to me).

Indeed, at about 3 p.m. I found myself wandering the only downstairs hallway at the Ventura venue and knocking sheepishly on the presiding judge's door - Judge Greenblatt.

I don't remember the exact intercourse that started the discussion, but I probably said something stupid like, "John Miller sent me here to get this settlement approved and he said that you were waiting for me to sign the paperwork," which of course set Judge Greenblatt off.

"Sit down," he told me as I handed him the settlement papers. He looked them over through his bi-focals, painfully slow in my young, impatient, attention deficit distorted anxiousness - I just wanted to get back to the office.

As he perused the paper work, with various facial expressions indicating surprise, I looked around his office. Memorabilia of trains and baseball (specifically the Los Angeles Dodgers) hung on the walls and rested on shelves.

Judge Greenblatt scowled at me and very calmly said, "This is inadequate. I'm not going to approve this. Call your client and get more money."

What? Are you kidding me?

"Miller said you knew about this and that all I had to do was to get this signed," I replied.

Greenblatt raised his voice a bit more, scowled at me even more looking over his glasses that had slid down his nose from looking at the documents and VERY firmly suggested that I leave his office, "tell Miller this isn't the deal I was expecting," and to get more money.

I was completely paralyzed! I didn't know anything about workers' compensation, much less how to spell it properly. I didn't know the file and I sure as heck didn't know the client. I was about to be made a fool!

I called Miller on the downstairs exterior pay phone (we didn't have cell phones then) in a complete panic. The anxiety killed me. I wasn't doing my job. I was frightened about calling the client. I was even MORE frightened of calling the senior managing partner to tell him the bad news. And I was petrified of having to bring something back to Judge Greenblatt that he might not approve - he had a great way of making me feel very, very small.

The balance of that afternoon was 2 high anxiety hours of calling, getting calls, walking into and out of Judge Greenblatt's office until he was satisfied that the settlement was proper for the injured worker.

"Welcome to workers' compensation," Judge Greenblatt said as he handed me the signed Order Approving.

I saw Judge Greenblatt often after that and he always treated me with respect and courtesy, engaging me with stories about trains, or how the Dodgers were doing that season. And always making sure that all of the details in a case file were resolved. Greenblatt hated files coming back from storage so he was a stickler for making sure that all of the issues were closed, including unpaid bills and liens.

And I'm sure, in his own way of training the newly initiated, thrilled that someone new was entering the industry.

By the way, I don't recall who the applicant attorney was, but he obviously was quite amused ... at my expense of course!

I haven't seen Judge Greenblatt in several years and am sad of his passing. He will be greatly missed.

I'm also sure most everyone in this industry has a similar story of their introduction to workers' compensation. Use the comment feature here to tell me yours.

WorkCompCentral

Gary Hall, Jr. - Don't Accept What Can't Be Done

Gary Hall, Jr., former Olympic swimming medalist, was the key note speaker at the California Workers' Compensation and Risk Management Conference in Dana Point, California yesterday, providing the audience with an insight into why athletes are not a good comparison to the general population when dealing with injury or disability that may affect job performance.

Hall is a type 1 diabetic and was diagnosed with the life threatening disease in 1999. Two independent doctors told Hall that his competitive swimming days were over.

You can take the athlete out of competition, but you can't take the competition out of the athlete.

Hall decided that he didn't have to accept the doctor's determinations and he sought out the assistance of a team of contrarians with the attitude that "it's possible" to continue competing.

International competitive swimming is marked by some of the closest margins of any sport, and some of the greatest odds. The chances of making the United States Olympic swimming team, said Hall, is 0.00014%. The time between first place winner in the 1996 Olympic 50m freestyle, Alexander Popov, and second place Hall was measured in the hundredths.

But these close margins cannot compare to the great odds Hall faced when diagnosed with diabetes. Imagine the devastating impact of being told by not just one, but two specialists that your competitive days are over.

Thousands of injured workers are told this every single day - that they will no longer be able to be "competitive" in the work place.

The difference between Hall and these injured workers is that Hall did not accept the prognosis. He found a way to deal with his condition and to continue competing, very successfully, becoming the oldest American Olympic swimmer in history at age 29 and winning another gold medal.

Hall had a motivation that extended beyond the financial reward of getting a pay check again. Athletes are like that - competition is a huge motivator for the athlete. It's not just about being better than the other person, it's about being better than you think you can be - pushing yourself to the body's limits so much that you throw up 13 times in an hour from over-exertion.

The average injured worker doesn't have that motivation, doesn't have that attitude, doesn't have people providing the encouragement about what CAN be done.

What the average injured worker does have, similar to Hall, are people telling him or her what can NOT be done - work restrictions, disability ratings, etc.

And like Hall, the challenge for workers' compensation is getting people to realize the possibilities, to act contrarian, and find the motivations that reward positive behavior and accomplishment. A huge challenge, no doubt, but entirely possible too.
WorkCompCentral

9/11 Claims Report Demonstrates Limited Relevancy of Work Comp

The most recent report by the New York State Workers Compensation Board (SWCB) concerning the ratio of 9/11 claims being controverted versus the rate of "normal" claims should not be surprising to anyone that reads this blog.

SWCB said 5,109 of the 12,296 workers' compensation claims filed by people who worked at or near Ground Zero and those involved in the rescue and cleanup – or about 41% -- were controverted by insurers or employers.

By comparison, 161,744 of the 986,849 claims not related to the World Trade Center attack – or 16% -- analyzed by the board between 2001 and 2007 were controverted by employers and insurers.

Robert Grey, a claimants' attorney and chairman of the New York Workers' Compensation Alliance, told WorkCompCentral that the disputes filed by private carriers most often involve disagreements among multiple insurers over which carrier is responsible for paying but that the New York City Law Department is routinely disputing 9/11 claims filed with SWCB.

SWCB reported that private employers controverted 61.5% of the 9/11 claims filed with SWCB. New York City agencies disputed a little more than half -- 50.2% -- of the claims.

The City denies any systemic distinction involving claims arising out of 9/11.

Robert Grey, a claimants' attorney and chairman of the New York Workers' Compensation Alliance, said carriers and the city found that by dragging out claims with disputes workers often give up before the claim is resolved.

In response to complaints from District Council 37 of the American Federation of State, County and Municipal Employees (AFSCME), the 19-member Worker Protection Task Force was created by the New York Legislature in 2005, assigned its Workers' Compensation Committee to review allegations that claims by rescue and clean-up workers were more frequently litigated.

The committee reported in May 2009 that it had found "strong evidence" that the union's contentions were valid. The committee said rescue, recovery and clean-up (RRCU) claims were being controverted at more than three times the typical rate.

Workers' compensation is a cash flow industry. In an economy as difficult as the one we have been in since 2008, it is no wonder that 9/11 claims - which are very expensive to compensate with claims of pulmonary disease, cancer and mental health injuries predominant - are going to face greater scrutiny, and greater delay.

Lee Clarke, occupational safety director for AFSCME's District Council 37, said, "It's taking 18 months to three years to get these claims resolved. It's making it difficult to get medical care for the first responders."

Three years to resolve a dispute. That's sounding more like the time frame of a civil law suit.

And when a civil law suit is resolved, that's the end of the case at least (pending appeals, which apply likewise to workers' compensation cases). A workers' compensation case is not over unless there's some final cash out settlement, which means that three years is only the beginning of a controverted claim going through the litigation process.

Is this evidence of the limited relevancy of workers' compensation to today's society as it is currently constructed and applied? I think so.

WorkCompCentral

No Shame That Investment Returns Predict Premiums

A study by researchers at the University of California, Davis purports to show that insurance carriers' investment returns were a more significant predictor of workers' compensation premiums than what was paid in claims from 1992 to 2007.

The study, published in the September/October issue of "Public Health Reports," looked at the variables surrounding premiums from 1973 to 2007 and found that on average, as the number of lost-time injuries and medical costs increased, workers' compensation premiums did increase. But the study also found that as the Dow Jones Industrial Average and inflation-adjusted interest rates on U.S. Treasury Bonds increased, premiums decreased, and vice versa.

J. Paul Leigh, PhD - Economics, lead author of the study, told WorkCompCentral that he is very confident with the findings. He said in running the numbers through a number of different regression models, there was a strong correlation between investment returns on premium rates that was not seen in other variables such as claim frequency or severity.

"We know, as students of the field, these rates of return are important and predicative of premiums," he said in a phone interview with our reporter Greg Jones. "But the public at large doesn't understand that. The public thinks rates go up because workers are lying and cheating, and fraud on the part of recipients of workers' compensation benefits."

Indeed - Dr. Leigh hits on a very important aspect of the public perception of workers' compensation: workers' compensation is a cash flow industry dependent on investments for profits. In most states an underwriting profit is an aberration. Carrier profits come from net investment returns.

That's why, in a perfect climate, the industry shoots for a 100% combined ratio - meaning that for every dollar that comes in as premium, a dollar goes out in expense. This is why most states have a "state fund" - they act as a stabilizing factor in the industry since they are not supposed to make a profit. State fund "profits" are returned to policyholders in the form of dividends. 

The 100% combined ratio mark is very hard to achieve.

When the pure premium ratio goes too far north of the 100% mark carriers sweat because net cash return has to work really hard to make up for operating losses. And when the mark goes well south of 100% carriers get pressure from departments of insurance and the public to lower their rates.

I see nothing wrong with admitting that investment returns are more predictive of premiums than actual cost of claims - that's a basic financial element of the insurance business. And the public's knowledge of this pattern is, in my opinion, actually good public relations for the workers' compensation insurance industry.

The average Joe Employer has no understanding of, nor the desire to understand, the financial underpinnings of his premium bill. To Joe it is just a cost of doing business and one he attempts to control with good risk management practices.

And for the most part that is good employer behavior.

But Joe Employer, if he is operating in a "businessman-like manner", is going to have an annual budget. Understanding how economic conditions affect his business is part of the budgeting process and understanding what the economy means to his cost of insurance is an important realization for Joe.

When the insurance industry tells Joe that unfortunately the economy means that his premium is going up, then that's a fact that Joe will have to factor into his budgeting, just as much as when the economy is humming along and carriers can pass along reduced premiums because investment returns were robust.

Most states have a competitive workers' compensation insurance industry - and the market for the most part keeps the cost of insurance in check. The bench mark is the state fund, which is not supposed to be making a profit. If the competitive carrier can not beat the state fund's premium declaration then the for-profit carrier goes out of business.

That the national, heck international, economy is in the tank is not news to anyone. That premiums need to go up when investments can not generate sufficient returns is not rocket science.

The only thing I really retained from business school was the first thing my finance professor said.

"If you don't learn anything else in business school, the one thing you must take away with you is this very simple fact: cash is king," he said. "You can have all the assets you want, but unless it is readily liquidable to pay the bills RIGHT NOW you're out of business."

Workers' compensation, as I said, is a cash flow industry. Cash goes in as premiums, some of it is set aside (reserved) for claims, some of it is spent on operational expenses, and the rest of it is invested hopefully to return net cash later on down the road to pay shareholders or policy holders. 

What we have seen, and what we are currently seeing, in the financial news does not bode well for premiums or the health of the industry. Hopefully those smart mathematical types that figure all this stuff out with their sophisticated financial models can keep this industry afloat until the economy recovers.

WorkCompCentral

TX Study on Back Surgery a Positive Step

The Texas Division of Workers’ Compensation (DWC) announced it plans to study lumbar spinal fusions to determine if injured workers benefit from the surgery or suffer long-term problems.

This is a worthwhile study and one that is important to future policy making processes.

There have been numerous studies internationally through the years largely reaching the same conclusion - that back surgery without clinical indication of instability creates more disability and costs than provision of only conservative treatment.

According to DWC medical adviser Dr. Donald Patrick, the annual number of spinal fusions in the United States increased by 77% between 1996 and 2001, while during that same period, hip replacement and knee arthroplasty increased only 14%, according to the U.S. Agency for Healthcare Research and Quality.

Patrick told WorkCompCentral that rates of lumbar spine fusions in the United States increased more than 250% over the prior 10 years, "without scientific or clinical evidence to demonstrate that fusions are effective for most back conditions," citing the medical journal Spine.

Yet, state workers' compensation systems have perverse laws and regulations in place that provide incentive for just the opposite.

For instance, California limits chiropractic intervention at 24 visits per injury unless the medical evidence provides a contrary conclusion. While most of the medical literature indicates that chiropractic has limited value in the medical provision food chain on a regular basis, the same evidence indicates that there is potential value in chiropractic on an occasional basis for pain relief. Yet there is this arbitrary limitation  (of course that was in response to chiropractic outliers who were taking advantage of the liberal provisions of workers' compensation law to profit at the expense of the overall system). 

And our culture celebrates surgery as a "cure all" without recognizing the dangers of surgery or the necessary ambitious rehabilitative effort required on the part of the patient.

It seems that every day there is a report of a sports personality undergoing surgery for some corrective issue and then "returned to work" in an incredibly short period of time. What the reports don't pass along is a) the pain endured by the athlete post surgery and during the rehabilitation process, b) the huge participation by the athlete in the rehabilitative process, and c) whether there is any subsequent health issues related to the surgery that aren't evident "at work." Most people aren't athletes and don't have the athlete's mentality or drive, and willingness to endure pain.

Our culture's penchant for elective cosmetic surgery underscores our social perception that surgery isn't that big of a deal - how many of you know someone, or perhaps yourself, that has undergone some cosmetic surgery and ended up surprised by just how painful and debilitating (at least temporarily) the post surgical process is?

A close friend of our family just underwent a "tummy tuck". It sounds so innocuous! "Tummy tuck" - what could be bad about that? She conveyed to us 2 weeks post surgery, still under a cloud of pain killers, that if she had know how much pain she would endure, and how much disability she would incur over the rehabilitative process, she would not have done it.

So somewhere there is a balance. Understanding, and then communicating, the relative benefits versus the risks (and costs) of invasive procedures in a statistically meaningful manner may help workers' compensation patients make good decisions regarding their health. 

And of course, for those injured workers who can't make good decisions themselves, legislatures and regulators will make the decisions for them - but they too need a macro understanding of the cost/benefit (also known as risk/reward) equation, hopefully with enough foresight to head off unintended consequences.

A major state agency undertaking a project to quantify the results of back surgery is a positive step towards such understanding. I don't think that the results of the study will be all that surprising. Hopefully communication to decision makers, be they injured workers, regulators or legislators, will help change perceptions and eventually culture.

WorkCompCentral

Change? Passionate People Will Disagree and That's Good

One of my earlier posts, "The Same Inputs Will NOT Produce Different Results!", produced quite a bit of comment in the LinkedIn group "Work Comp Analysis". People in this industry are passionate about it because workers' compensation plays a very important part of our economy by providing some stability and security to our society.

Participants in the Linked In group responding to that post question whether a grass roots effort could really evoke change to a system as ingrained as workers' compensation.

Here is my response, edited for clarity and obvious typos:

First off, change won't happen overnight. Anything that is going to make any big difference will require years of hard work and dedication by those who believe in a cause and are willing to sacrifice for a cause.

Second, I believe that change will be incremental - and in that I believe it will take a relative small state to initiate change (hey, it was a small state that started the work comp trend in the first place) to make a proof of concept and a model that other states could follow. (e.g. Vermont tackling single source medical).

Third, whatever happens needs to account for the displacement of many, many self serving interests that are at odds with the ultimate outcome - AND -

Fourth, there needs to be agreement on what the ultimate outcome should be!

Indeed I think that defining the ultimate outcome is probably the most difficult item. Why? Because there is an inherent conflict tugging at the two primary constituencies: the employer and the employee.

The employer seeks financial stability and the most cost effective solution.

The employee seeks financial security (not the same as stability) and return to pre-injury life style.

These are largely mutually exclusive outcomes because financial stability/cost effectiveness focuses on controlling expenditures, where as financial security/return to life style focuses on controlling income.

So, what is the ultimate outcome? That requires a cultural change - hence why I think that #4 is by far the most difficult.

In America, we are taught that money fixes everything. That is our culture. That is why we pay money when someone gets hurt - because we have never figured out a different way of measuring the loss.

WHOA! See, even I am susceptible to the inherent cultural thinking of our society - why does it have to be viewed as a LOSS? It is just a change. Some change is more traumatic than other change, but if you analyze this objectively, there is no "loss" - that is a cultural view of change.

Example - sprinter Oscar Pistorius, who has born with no fibulae in both legs and uses carbon fiber "blades" to run said in a recent interview: "People ask me if God, Buddha, or whoever came down now and wanted to give me my legs back, would I take them? Probably not.... I mean, there's nothing wrong with me."

For Oscar, there is no loss. He doesn't know what that means. He's as normal as you and me as far as he's concerned - he has dealt with CHANGE.

Culture.

So we start with culture. For example, it took us 100 years to figure out how to reward people for being disabled - some would say we still don't have that right.

But why reward someone for being disabled? They have incurred a change but that doesn't necessarily predicate a negative outcome.

The cost of workers' compensation goes up and goes down. When it goes up this is change that employers view as negative, and when it goes down this is change that employers view as positive. But this is monocular view - looking at the cost of a single component without taking into account impacts on other financial components on the balance sheet, expense OR income. The employer culture does not see a reward in workers' compensation. It is an expense component.

Our culture sees workers' compensation as a cost to be controlled - ergo a negative viewpoint. How about redefining workers' compensation as a benefit of employment? Not an entitlement cost, but an attractive benefit by which to attract good, capable workers?

A cultural change...

This is long enough for this post - you get the picture. The culture of workers' compensation has taken well over 100 years to evolve. Evolution takes time.

And I might add, the focus of culture change is not just on the employee, or the employer, but on all participants in this privatized social benefit system (which is what work comp is), from the government, to the underwriter, to the claims department, to the medical provider, to the bill reviewer, to the rehabilitation specialist, etc. etc. etc. This "industry" was built on a certain mindset, a certain culture that took 100 years to evolve.

So - bottom line: how do we define the ultimate outcome? Start with that as an ideal and work it backwards to find the elements that will drive that outcome. The ideal for most people is likely the same ideal that begat workers' compensation: prompt medical attention for work injuries, stabilization of employer risk, financial security for the worker.

If these are agreeable ultimate outcomes, next is creating a culture that takes advantage of 100 years of experience and study to create motivations consistent with the modern world. We are much more sophisticated than we were even just 20 years ago and we can take advantage of our greater understanding  in a much more calculated, precise manner.

I know for sure this is a sensitive topic and I'll either be vilified or praised, but in my experience that means only that people are passionate about work comp and willing to debate their passions - and THAT is the real start of change!
WorkCompCentral

One Way to ID Scofflaw Employers: IRS Co Op

Al Capone wasn't brought down on racketeering charges.

No, it was income taxes.

And now scofflaw employers who misclassify their workers as independent contractors will face similar fate if agreements between The U.S. Department of Labor (DOL), the Internal Revenue Service (IRS) and labor departments of up to 11 states prove fruitful.

U.S. Labor Secretary Hilda Solis said at a ceremony in Washington, D.C., that she signed memorandums of understanding with the IRS and labor officials in Connecticut, Maryland, Massachusetts, Minnesota, Missouri, Utah and Washington state.

Solis said state labor officials in Hawaii, Illinois and Montana, as well as New York Attorney General Eric Schneiderman, also have agreed to sign memorandums of understanding with the U.S. Labor Department's Wage and Hour Division.

The agreements call for the state agencies and the IRS to share information with five federal agencies: the Wage and Hour Division, the Employee Benefits Security Administration, the Occupational Safety and Health Administration, the Office of Federal Contract Compliance Programs and the Office of the Solicitor General.

Under the terms of the memorandum:

• The IRS will evaluate and classify referrals made by the DOL and conduct examinations at IRS discretion.
• The IRS, at its discretion, will share employment tax referrals with state and municipal taxing agencies that are part of the agreements.
• The IRS will provide annual reports to the DOL summarizing the results of the referrals.
• The IRS will alert the DOL when employers file lawsuits following an examination based on a Labor Department referral.

The program has opposition from Associated General Contractors (ACG), a lobbying group for the construction industry. They're concerned that some employers will be unwittingly penalized due to the complexity of employment laws because the definitions of employee and independent contractor are different between IRS rules and the various state rules.

I disagree.

The agreements between the Feds and the various states call for information sharing only. It will be up to the state labor departments to bring enforcement actions within the context of their own laws.

Once the unscrupulous contractors start getting wind of cases being filed as a result of this information sharing they will either start complying, or will find other ways to evade the law and compete unfairly.

One element that I would urge state labor departments that are operating under these agreements is to institute an amnesty program that would allow formerly non-compliant employers, whether intentional or not, to mea culpa and bring their businesses into compliance.

LA Times Underscores Rx Issue - WC Has Responsibility

The Los Angeles Times yesterday ran a headline story in their paper edition (yes, I still get the newspaper delivered to my door - but only the Sunday edition because my wife wants the coupons!) that underscores my recent, and perhaps pervasive, rants on the problems our industry has with prescription drugs.

"Drugs exceeded motor vehicle accidents as a cause of death in 2009, killing at least 37,485 people nationwide, according to preliminary data from the U.S. Centers for Disease Control and Prevention," The Times said.

Since vehicle accidents were the single largest cause of death and disability in workers' compensation, is treatment that workers' compensation patients receive via prescription medication now the leading cause of fatalities?

The Times article goes on: "While most major causes of preventable death are declining, drugs are an exception. The death toll has doubled in the last decade, now claiming a life every 14 minutes. By contrast, traffic accidents have been dropping for decades because of huge investments in auto safety."

So does this mean that despite continuing improvements in work place safety, such gains are being compromised by workers' prescription drug treatment?

According to the Times article, which should be no surprise to anyone following the controversy, prescription drugs now cause more deaths than heroine and cocaine combined.

"The rise in deaths corresponds with doctors prescribing more painkillers and anti-anxiety medications," the article states, providing some statistics to back up the claim, statistics that are all too familiar with the workers' compensation community that has been following the research by organizations such as CWCI, WCRI, the Texas DOI, and others.

Indeed, the death toll is highest among the age group in their 40s, which corresponds to the largest segment of workers' compensation claimants as bodies age and deteriorate and people seek redress from back pain and other life's maladies.

The article concludes that, unfortunately, society has not figured out how to put a safety belt on this issue. 

Once addicted, industry controls such as pharmaceutical formularies, or reimbursement restrictions might stem the outgoing dollars from the work comp medical benefit component, but does not stop the intrepid from seeking "treatment" on the black market.

Prescription drug addiction is not just a workers' compensation problem, but the industry needs to control the supply of medication better to prevent addiction in the first place. 

Pain is not a nice thing, but it is the body's way of warning a person that a certain activity isn't good. It can be managed, but pharmaceuticals are not a long term solution.

MO - Tough Choices Need to be Made

Missouri is getting a tough lesson in the unforeseen consequences of artificial caps where flexibility could have provided protection against volatile economic issues.

Like many states Missouri has a Second Injury Fund that had a good intention - provide incentive to employers to employ the previously disabled without worrying if a work injury would make the employer solely liable for the consequences of compound disability.

In recent years, payments into the fund have decreased due to legislative changes that capped the surcharges paid by employers on workers’ compensation policies at 3%, along with a drop in workers’ compensation premiums – which decreased the base for the surcharges.

In fiscal year 2007, the fund received $70 million from the surcharges. In fiscal year 2011, the amount was $40.4 million. As a result of the declining revenues, the fund is unable to pay injured workers the benefits they have been awarded.

The Missouri Chamber of Commerce and Industry reports the unpaid liability to workers with permanent total disability awards increased from $4.9 million in July to $7.1 million as of Sept. 1. More than 100 injured workers are waiting for benefits awarded to them, and more than 30,000 workers are waiting to have their cases considered by the fund, the chamber said.

The Chamber wants the law changed to provide benefits and/or adjudicate those cases pending, so there isn't a spike of assessments against employers later on down the road when the fund eventually goes bust.

“Right now, Missouri is just sitting back while cases continue to mount, and injured workers go without the benefits awarded to them,” Daniel Mehan, president and chief executive officer of the chamber said in a statement to WorkCompCentral on Monday. “It’s bad public policy and in the end, Missouri employers are going to be holding the bill.”

Another business group though opposes any increase in assessments whatsoever, contending that the problems with the fund stem from inadequate controls and excess spending.

"We believe the problem is one of spending" rather than a revenue shortfall, Nathan Dampf, spokesman for Associated Industries told WorkCompCentral on Tuesday. Employers pay into the fund, but the state spends the money -- and is responsible for defending the fund against using the fund to pay for benefits not originally contemplated, he said.

Because the state hasn't been effective in defending the fund, businesses should not be required to pay more to continue it, Dampf said.

And even thought the state legislature is in special session to deal with left over business from the regular legislative year, the fund isn't a topic on the agenda.

Someone, somewhere in Missouri, will have a bill to pay at some point in time. The state's legislature has a bit of a problem on its hands and in the meantime over 30,000 workers await something, anything, to happen so they can move on with their lives.

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As a segue, if you have any responsibility for advertising or marketing I urge you to check out the blog of our Advertising Sales Director, Christina Childers, as she imparts lessons from the Information Age relevant to sales and marketing. This month she challenges the reader to examine their social media strategy.

Wisconsin's Unique Opportunity to Get It Right

Wisconsin stakeholders are talking about instituting medical networks into their state workers' compensation system.

They have the benefit of learning from the trend setting states about what to do and what not to do with medical networks.

In theory, a workers' compensation medical network should provide efficiencies, and therefore savings.

The mistake that medical networks make in the context of work comp though is that their model of savings is based on the cost of individual procedures. Doctors feel cheated because what they know they need to do can not bring income through the door, and thus cost shifting to procedures with a higher reimbursement rate occurs.

The perverse effect of course is that savings aren't realized and medical networks just become another bureaucratic hassle with increased paper work and decreased function.

The first step to designing medical networks in a work comp setting should be to understand and measure a) all of the cost components of providing treatment and b) understanding and measuring health outcomes (note I said "health" outcomes, because while the physician may be able to release a patient for return to work there are way too many factors outside the doctor's control that impact actual return to work).

I briefly went over this process in my post about TDABC.

Karen Wolfe, President and CEO of MedMetrics, coincidentally argues essentially the same point in her blog posted.

She notes: "the strategy of discount networks is to contract with as many providers as possible, then measure success based on network utilization, penetration, and total discounts. More network utilization produces more discounts and reported 'savings'. Moreover, the discount network strategy relies on the presumption of medical excellence and perfect moral integrity among providers, along with knowledge of the unique characteristics of Workers’ Comp."

The discount strategy model of most networks that Wolfe notes are based on elements that don't coincide in the real world.

Wisconsin has a very unique opportunity, if stakeholders are truly interested in a performance based medical reward system, to design laws that encourage networks and physician practices to a) understand what the TOTAL cost of treatment is for any given diagnosis, b) pay for treatment on the totality of services, NOT on a discounted per procedure basis, and c) agree on what the expected health outcome should be with rewards for hitting that goal.

I urge anyone that is involved in the medical care component of workers' compensation, in particular those on the negotiating table right now in Wisconsin, to become familiar with the works of Kaplan and Porter at Harvard Business School (one example here). Smart people have figured out how to measure both costs and outcomes. We can use these lessons in the design of work comp networks.

Rx Abuse Problem? Just Follow the Money

Since I have been on a roll recently about prescription drug abuse in workers' compensation, what's another column? Especially since the National Council on Compensation Insurance (NCCI) released another study yesterday on the excesses the industry faces from pharmaceutical overindulgence.

Some astounding, yet not necessarily surprising, new facts: the cost of prescriptions were 19% of overall medical costs in 2008 and 2009, and the opioid painkiller OxyContin has become the most prescribed drug in work comp.

Florida takes the lead during the study time period for physician dispensing and surpassed California. Georgia ranked third. In all three states the balance of physician dispensing was over 40% of all drug costs.

The experts in Florida say that the recent amendment to that state's laws won't change the picture. The Florida Legislature passed a ban on physician dispensing of drugs on Schedules II and III of the U.S. Drug Enforcement Agency's controlled substances list. According to the NCCI report, nine of the 10 drugs dispensed by Florida doctors to injured workers in 2009 were not on the DEA's schedules.

Former Gov. Charlie Crist vetoed legislation passed in 2010 that could have capped the price of drugs sold by repackagers at the average wholesale price (AWP) established by the drugs' original manufacturer plus a $4.18 dispensing fee.

The Florida Senate passed a similar bill last session. But the bill stalled in a House-Senate conference committee that passed the physician-dispensing bill instead.

The NCCI report concludes that:

• Overall cost increases were driven more by utilization than price increases.
• Increased physician dispensing also boosted drug costs per claim. Florida average prescription costs per claim increased by 40% between 2005 and 2009, while the share of physician dispensing jumped more than 30% during the period.
• By comparison, Oregon prescription costs per claim dropped by nearly 140% during the period. NCCI noted Oregon recently reduced reimbursement rates and dispensing fees for workers' compensation prescriptions.
• In California, which capped the price of repackaged drugs at the maximums in the state fee schedule in 2007, the share of costs associated with dispensing physicians dropped to about 45% of total drug costs in 2008 but increased slightly in 2009 to about 46%. California doctors began to substitute drugs bought from original manufacturers in place of repackaged drugs during the past two study years.

You can draw your own conclusions about one of the primary drivers in the prescription drug abuse problem facing the workers' compensation industry. The anecdotal implications on what to do are likewise apparent - just follow the money.

Rx Abuse Issues Due to Poor Risk Management

Emergencies happen. Usually at the wrong time.

Such was the case yesterday. WorkCompCentral's site was down for a protracted period of time because the hosting location experienced the threat of a fire. The fire department shut down the power to the buildings HVAC system which caused our servers to heat up, and the excessive electrical draw from our server's fans caused a circuit to trip.

This should not have been a problem though because in good risk management we should have had our power adequately planned so no excessive load would be experienced.

But our design was insufficient so as a consequence WCC was off line for over an hour - it was corrected, we learned our lesson and changed some configurations.

What does this have to do with workers' compensation besides just me whining about our service being unavailable to our customers?

Workers' compensation, when it comes down to the basic nuts and bolts, is just a risk management tool.

It is a tool for businesses to ameliorate the financial catastrophe of a worker getting injured on the job.

It is a tool for employees to ease the tragedy of a work injury and hopefully prevent a family from losing home, hearth and mantle.

It is a tool for society to try and maintain as much productive up time with the labor force as possible thereby contributing to economic vibrancy.

But sometimes, even with the best of planning and best of techniques, the unexpected or unforeseen occurs - something that is just plain beyond planning and then the proverbial bovine excrement hits the fan.

Such it is with workers' compensation.

Yesterday Joe Paduda of Health Care Matters gave a free webinar to 100 enrollees to describe the advent of the prescription drug problem that has grown to a national issue, and how that problem differs significantly in workers' compensation than in the general health care system.

Why is the prescription drug problem different in work comp than general health?

The drugs that were developed for the general health care system to provide relief to terminal cancer patients are being prescribed in the work comp system for pain symptoms in low back patients where there is no clinical indication of serious abnormalities; and in general health care the payer (i.e. insurance company) can say "no" much more easily than a work comp payer.

Some carriers in the workers' compensation community are taking the "just say no" tact by essentially saying if the medication is not medically indicated by treatment guidelines standards then the physician and/or employee must be able to demonstrate with some other sound scientifically based evidence that the drug is indicated for the condition and for the duration being prescribed.

Will this hold up in court when the affected injured worker represented by the well meaning, able attorney seeks redress for such a position? I don't know nor am I willing to proffer a guess - the workers' compensation laws are generally to be liberally construed in favor of the injured worker to cure or relieve one from the effects of an industrial injury.

But to the administrative law judge and/or appeals panel that takes the case under consideration - does "liberally construed" mean that a person's life should be irreparably damaged on account of prescription drug addiction? When does prescription medication cease being a "cure or relieve" application and become a burden to the injured worker, his employer, his family ... society?

The prescription drug issue that is escalating in workers' compensation requires that all of the players "just say no" when the request for medication exceeds recommended guidelines.

And what about legacy claims where an injured worker has been on addictive pain medication for so long that there are serious withdrawal consequences if they are taken away? Failure to "say no" early on means that the payer/carrier/employer must foot the bill for intervention and treatment - and if this means "buying" additional "body parts" then so be it.

WCC failed to adequately distribute electrical load due to poor risk management planning. We paid the price and learned our lesson. Work comp systems failed to adequately monitor prescription pain medication abuse early on. We are paying, and will continue to pay, the price and hopefully we are learning our lesson.

Rx Abuse A Universal Issue

The issue of prescription drug abuse in the workers' compensation system is one of the most perverse and universal trends across state lines that I have seen in many years because of its scope and depth.

Texas joins the many states that have, or are, tackling the problem and trying to figure out methods to control the damage that pharmacological excess can have on injured workers, their families and society at large.

The Insurance Council of Texas' Annual Workers' Compensation Conference last Thursday was the first time I had heard of "pharm parties".

A pharm party is where kids raid the medicine cabinet of their parents, then all get together, throw the pills into a big bowl and then everyone grabs handfuls and "party on". Kids always seem to find new ways to get into trouble and to take adult materials in search of fun, but this is a highly dangerous practice because of the unknown and potentially lethal consequences of contraindications in medications.

Some of the practices being implemented by states to control prescription drugs include: introduction of closed formularies, requiring preauthorization for certain classes of drugs after certain time periods, market controls such as not paying for prescriptions that fall outside of medical guidelines without adequate documentation, etc.

Some of these controls may work, some may result in development of a larger underground market, some may not work at all.

Austin attorney Stuart Colburn of the Downs and Stanford law firm, in his presentation to the Insurance Council conference, commented that the prescription drug abuse problem is different from the problem of illicit drugs.

Abusers of prescription drugs have more access to scheduled narcotics than to illegal drugs, and to drugs of “higher quality” and purity, Colburn said.

But either form of abuse can lead to similar outcomes, Colburn said. “Lives are being lost,” he said. “All stakeholders should be collectively engaged in the search for solutions. Doing nothing creates addicts and destroys families,” he concluded.

Education is one step we as an industry can take for our part in answer to the prescription drug problem. So I'll put in a shameless plug because I think that the more people are aware of how the issue arises and how to deal with it the better off we will be as a society at large.

First is a free webinar  today, September 12 at 1 p.m. PT - "Prescription Drug Abuse in Workers' Comp" hosted by Joe Paduda of Managed Care Matters. Joe will present material on utilization of narcotics for treating work injuries; benchmark studies about opiods and workers' comp; how the states compare; the risks posed by long-term use of opiods; addiction problems and liability; and encouraging steps being taken to curb the abuse of prescription pain drugs. This webinar is "sold out" but there may be room for late attendees should some who signed up don't "attend". Call WorkCompCentral call customer service at 805-484-0333 x113 or x133 to see if there is any room.

The second free webinar is scheduled for Monday, October 3 at 1 p.m. PT - "Treating Opioid Dependency and Addiction in the Work Comp System" is a presentation by Dr. Thomas Jan, an addiction specialist. Dr. Jan will discuss the medical aspects of opioid dependency and addiction, how medical providers can tell the difference and discuss effective treatments, including the proper use of Suboxone,which can be administered through a physician's office. Attendance is limited to the first 99 registrants. You may sign up online for this course by following this link: https://www3.gotomeeting.com/register/212489334 or by calling WorkCompCentral customer service at 805-484-0333 x113 or x133.

The Same Inputs Will NOT Produce Different Results!

Computing engineers find it amusing when people continue to utilize the same inputs expecting to get different results.

Likewise I find it illogical when regulators continue to utilize the same tools (i.e. inputs) and expect to obtain different outputs.

Two examples appeared today in the WorkCompCentral News reports.

First is a story about the ongoing, never ending, debate about what to do with "lien claims" in the California system.

Lien claims have been a "problem" in California as long as I have been in workers' compensation - 27 years now (yeah I'm bald and what few hairs are left are turning gray). The "problem" is that these pesky little legal units of reimbursement entitlement claims pop up and interfere with the claim adjuster's main job of dealing with the case in chief. This can be either the case in chief is still pending or after the main issues have been resolved.

The traditional legislative and regulatory reaction to complaints about liens (whether it is from the claimants about not getting paid or the employer/carriers about how much time they consume) is to tighten judicial procedures. Such is the case with the current administration's proposed regulations, the topic of which was in public debate yesterday in San Francisco.

The Workers' Compensation Appeals Board (WCAB) on Aug. 4 proposed regulations that, among other procedural changes, would create a mechanism to dismiss a lien when a claimant does not file a declaration of readiness (DOR) to proceed within one year of becoming party to the case, or within one year of an order taking a lien conference or trial off calendar, whichever is later. The proposed regulations would also require a lien claimant or party to a lien to request a lien conference when filing a declaration of readiness and would require the lien claimant and defendant to prepare a pretrial conference statement that frames the argument and lists evidence and witnesses for a lien trial if the dispute can't be resolved at the conference.

The proposed regulations remind me of the old doctor joke: "Doc, when I do this it hurts." Doc - "Don't do that."

Ergo lien regulations - treat the symptoms and the cause will remain. The WCAB has the authority to treat the cause and they should exercise that authority.

The cause is that no one is responsible for liens. Lien claimants may have their independent rights by law and regulation, but who is responsible for incurring the obligation of the vendor claiming payment entitlement? THAT is the party who should be responsible for ensuring reimbursement of the vendor.

Ditto in Tennessee. Like most states in the workers' compensation industry medical costs are out of control and the reaction is to control the cost of each procedure in the course of treating a workers' compensation injury or illness. 

A proposed rate filing in the state that would increase rates by 6.3% is causing regulators to take a look at the medical reimbursement schedule and proposing a reduction in the fee schedule. The same old arguments are at hand in both (or more?) sides of the debate - fees need to be cut because they are too expensive vs. access to care if physicians aren't adequately compensated.

Stop the madness!! This is the same set of arguments that go nowhere each and every time the issue is raised. And each and every time the issue comes up, adjustments are made to a fee schedule, then everyone goes back to business as usual with cost shifting, procedure manipulation, bill review and utilization review shenanigans and in a few years we again have another crisis.

I've been on a roll lately about examining the value of medical care delivery and how to control costs by paying based on value returned for the course of treatment rather than on a procedure cost basis and I remain convinced that this is the only way that medical costs ultimately can be brought under some sort of logical control. 

Mark Walls,  assistant vice president of claims for Safety National, recently opined in Risk & Insurance Magazine that the "fee for service" model in workers' compensation doesn't work and that regulators need to look at how medical services can be paid for on a value scale.

Models are out there for how to measure outcomes, how to measure costs on a value basis and those models can be adopted into regulations that will result in medical fee stability - after all the issue is not how much the medical component takes up in the total benefit equation, but the rapid pace of medical inflation in relation to the balance of other benefits.

In both situations, regulators have the authority and power to change the mindset, ergo culture, of the systems but they need to go out of the box to do so. Expecting different results by pushing the same buttons a little harder is illogical.

Texas Report Card: Can It Measure Value?

My presentation today at the Insurance Council of Texas' (ICT) Annual Workers' Compensation Conference in Austin is "The Breaking Point: Developments Impacting Workers' Compensation Systems Nationally".

Fortunately I'm the last speaker before lunch so I will have the attention of the audience because I will hold the key to their timely lunch break!

The issues I will be addressing are not foreign to those who read WorkCompCentral News or this blog. In order:

1. Prescription drug abuse
2. Pharmaceutical fee schedules
3. Repackaged drugs and physician dispensing of drugs
4. Financial health of the industry
5. The economy
6. and how Texas compares to the national trends

Honestly, there isn't any mystery as to what the current issues are that confront the industry nationally. 

The difference is what various states and/or systems are doing to confront these various issues.

Texas is unique - not just because it is the only state where workers' compensation coverage is optional, or because it is one of the few states where the workers' compensation line has profitability, but because state laws mandate that system performance and "customer" satisfaction be measured and reported by the Department of Insurance.

The "report card" process involves measuring sometimes disputed performance criteria based on mandatory data reporting by carriers to come up with a basic grading system for insurance companies writing and adjusting the line. Results are published and one can drill down into the data used for the rankings to see specific performance measures. This ranking is intended to assist consumers of workers' compensation insurance products choose coverage and theoretically increase competition among carriers to boost overall system performance.

So how DOES Texas compare? 

If you're a carrier then Texas is a good state to write business in. Compared to other states carriers in Texas have a very low combined ratio meaning that investments don't have to work as hard in order for carriers to experience profitability.

If you're an employer in Texas then the latest statistics available aren't bad as premiums follow the national trend of declining, record numbers of employers are participating in the system, and more workers who received temporary income benefits return to work within 6 months - how much all of this is actually due to the economy as opposed to actual system performance is up for debate.

If you're an injured worker in Texas the data is less clear because the report card process doesn't go to the injured worker - nor was it intended to do so by statute. So it is difficult to gauge Texas work comp performance from the worker perspective.

But the one universal trend that Texas can not claim superiority over other states is rising medical costs that outpace even the Medical Consumer Price Index rate of inflation. Texas faces the same issues that other work comp systems face - medical inflation that threatens work comp affordability.

I've opined before that I believe that the solution to the cost of medical inflation requires a different mind set and that rather than trying to control costs work comp should focus on trying to deliver value - and this is done by measuring outcomes versus the cost of delivery - there are methods that really smart people have figured out how to accomplish this task. See earlier posts.

The process of delivering value in the work comp system is not complicated, but it is labor and data intensive and requires a completely different way of looking at health care delivery and outcomes. 

One way the Texas Department of Insurance may be able to improve its report card system is to take a look at how it can measure and report value - if Texas can do this it will be a model for the rest of the states that struggle with controlling costs while still delivering meaningful benefits to injured workers.

Sausage Making Comes to a Close

Workers' compensation is a statutory creature, born of the political process.

The political process is messy, with constituencies, stakeholders and interested persons having their say in the construction of laws ultimately ending up with some compromise, or bullying, into positions that define the next generation of either spending or making money - at least in the realm of workers' compensation laws.

I'm reminded of this insanity as we close into the final week of legislative activity for many states as bill upon bill are moved around legislative committee, getting amended, voted on, suspended, etc.

Oft attributed to Otto von Bismarck (who coincidentally is also attributed with introducing the first workers' compensation concepts into society), is the saying "law is like sausage, it is best to avoid seeing it made." Indeed, it's not a pretty process and the machinations of a legislature in action at the final hour can make one queazy! But if there's one positive attribute to this crazy process, is that if you're interested and paying attention the process can either help laws pass, or inhibit forward their movement.

We are seeing this in the final hours of the California legislature where there are several bills that are intended to chip away at the laws passed upon the domination of the Schwarzenegger Administration in 2004.

Our Western Bureau Chief, Greg Jones, summarized the state's pending workers' compensation bills in this morning's top story and it highlights how the political process can work for or against the passage of laws. Three of the most controversial bills are up for vote in the Senate, and must return to the Assembly for passage because of amendments that occurred in the Senate [comments in brackets are my personal votes]:

AB 1155 (Alejo, D-Salinas) proposes to change the apportionment law to eliminate discrimination against naturally predisposing conditions in certain classes of people defined by age, gender, race, etc. [AGAINST]

AB 375 (Skinner, D-Berkeley) would create a new presumption of injury for nurses with blood borne diseases. [AGAINST]

AB 947 (Solorio, D-Santa Ana) would extend temporary disability status where surgery occurs after 104 weeks of TD benefits have been exhausted, provided the delay is not caused by a worker's failure to undergo recommended treatment and the surgery was delayed as a result of a treating physician recommending a less invasive treatment initially. [AGAINST]

There are other bills pending Senate vote involving a loan from the Uninsured Employer Benefit Trust Fund to start up another state agency within the Division of Industrial Relations [AGAINST]; one that would require the Department of Workers' Compensation come up with ANOTHER booklet explaining workers' compensation to injured workers (heck - they should just use the WorkCompCentral Flowchart!) [AGAINST]; change reimbursement rates for compound drugs [FOR]; require utilization review only by California licensed physicians [FOR].

Physician lobbyists will be watching closely Senate Bill 923 (DeLeon, D-Los Angeles), which would require the Division of Workers' Compensation to adopt a fee schedule using the resource-based relative value system (RBRVS), which is on the Assembly Floor for a vote [FOR].

It appears that Senate Bill 863 (Lieu, D-Torrence), which would require liens be in writing and would create a three-year filing window for services provided before July 1, 2012, and an 18-month window for services provided after that date is dead and that Senate Bill 432 (DeLeon, D-Los Angeles), which would require hotels to use fitted sheets and provide housekeepers with long-handled cleaning tools is likewise going no where this legislative session.

While many of us may only be concerned with the final outcome, it is important to see how these laws take shape and understand who is positioning to benefit from them. The political process, like sausage, blends all of the parts together to present the final form. Sometimes its good sausage, sometimes it isn't.

AB 899 Contains Unacceptable Presumption Provision

I said on Thursday that AB 899 (Ammiano, D-San Francisco) wasn't as bad as the general press was making of it.

However there is one aspect of that bill that should give pause to legislators debating the bill - a weird provision that provides for tort liability in a workers' compensation remedy for domestic workers.

Currently in suspense, AB 899, which has been amended five times since it was introduced on Feb. 17, would require all domestic work employers to carry a workers' compensation policy covering domestic workers, which includes live-in caregivers and personal attendants. The definition of personal attendants in the bill includes babysitters, but other provisions state that family members and individuals under 18 would not be considered domestic employees.

Employers of domestic workers would be required to maintain records of wages paid and hours worked, and the bill also proposes a presumption that any injury suffered by a domestic worker was caused by the negligence of the employer.

Most of AB 899 is already law in other parts of the Labor Code - e.g. the requirement for wage records, notices, workers' compensation, etc. This bill is a refinement of those requirements.

The real troubling aspect of AB 899 is the presumption of negligence.

I have opined in the past that I'm not a big fan of presumptions. I don't believe that they are necessary in most circumstances, they create liability in situations where none was intended, and I believe they create more litigation than resolve it.

The presumption AB 899 though is worse because it creates a tort liability where workers' compensation should be the exclusive remedy. Negligence implies fault, which has no place in workers' compensation - a "no fault" system.

So, while most of AB 899 is not the draconian "Babysitter Apocalypse" that the press has made it out to be, it needs work before being revitalized out of suspense for 2012. Most importantly the presumption of negligence needs to be removed, and the issue of work place injuries by domestic workers needs to stay within the workers' compensation system.

CA Government Messing with Work Comp $$ Again

California legislators love to make workers' compensation costs a political issue, but when it comes down to The Money they are quick to both strangle the agencies responsible for the system and to take money that was supposed to be exclusive to it.

This time legislators want to remove $4.3M from the Uninsured Employers Trust Fund (UETF) and "loan" it for the creation of a new agency that has nothing to do with workers' compensation, the State Public Works Enforcement Fund, with no schedule for repayment.

For those of you who are not familiar with the financing of the California work comp system - the Division of Workers' Compensation (DWC) and the UETF are funded SOLELY from employer assessments on work comp insurance policies. This money does not go into the General Fund and is supposed to be untouchable, used only for the purpose of operating the state's work comp system.

This past couple of years, even though DWC is supposed to be independent of government finances because it is specially and separately funded by said assessments, it was subject to the same budgetary constraints as all other state agencies funded by the General Fund for political reasons only - the Administration did not want to have one agency fully funded while all other agencies deal with austerity budgeting because it would send a 'bad message' to the other agencies.

Wah...

Thus DWC could not hire people, could not replace outgoing staffers, could not upgrade equipment, purchase new supplies, etc., even though the money was "in the bank".

The government has never told us where all the money is since its not being used to fund normal DWC operations.

Now the government wants to loan itself money from a fund that is supposed to be off limits to the rest of government so it can fund the start up of another, new, state agency.

I'm calling BS!

Last year, because of our state's inability to set a budget, the UETF almost didn't make its payments to injured workers whose employers cheated the system and decided to operate with out work comp insurance.

Those of us who are responsible, law abiding, employers get penalized for the bad acts of others. Maybe they will get caught, but likely not as it is ridiculously easy to skirt the laws and operate a small business on the slight.

Worse, the government not only would cheat the law abiding employers of the state, but its actions contribute to the bad economy by strangling an agency whose greater goal is economic stability and its function is to make sure that people get back into production mode as soon as possible following a work injury - causing greater expense to business due to indirect costs of replacement labor, etc., and decreasing gross margins due to lower production levels.

I've opined before and I'll say it again - the California legislature needs to keep its hands off employer assessment money, and needs to stay out of the way of workers compensation operations!

AB 436 is on the agenda for a vote in the Senate and, if approved, will go back to the Assembly for a vote.

If you are concerned about California workers' compensation I urge you to write to your legislator and ask them to vote 'NO' on AB 436.

CA's AB 889 - Not As Bad As The Press Says It Is

California's "Nanny State Law" has been generating some controversy lately in the larger press but I'm not sure it deserves the all the criticism the press has been heaping upon it.

AB 889, Ammiano - D, San Francisco, would repeal the existing exemptions of various labor laws (wage, hour, workers' compensation) to "domestic employees" - the intention is to cover workers of service organizations that provide housekeeping, elder care and other services to us busy men and women working our day jobs and are too exhausted or don't have the time to perform all of these tasks.

The fear of the general press is that this law would also capture those who are usually hired for cash by Mom and Dad when they want to go out for the night, have the house cleaned, get the lawn mowed, have the car washed, take care of Grandma or Grandpa for a day, pick up the dog poo, etc. by one of the neighborhood kids.

These are the jobs that my son and daughter were hired to do around our little neighborhood. Occasional once in a while jobs that taught my kids responsibility, what working for money meant, savings, discipline - in short all of the attributes that we as law abiding, responsible citizens want our kids to learn as they grow up in a capitalist society so that when they become adults they know what the value of a dollar is and how good, hard work is appreciated and rewarded.

I understand the intention of this law - to protect a class of workers who traditionally have otherwise been abused (relative to California's normal wage and labor laws) by labor service companies that have used these exemptions to build a domestic services work force.

The bill's good intentions, however, may be overshadowed by the unreasonably broad definitions of "domestic work" and "domestic work employee".

A whole new part of the Labor Code, 4.5, would be added to Division 2, starting with section 1450.

1451 contains the definitions:

"Domestic work" means services related to the care of persons in private households or maintenance of private households or their premises. Domestic work occupations include childcare providers, caregivers of sick, convalescing, or elderly persons, house cleaners, housekeepers, maids, and other household occupations.

"Domestic work employee" means an individual who performs domestic work and includes live-in domestic work employees and personal attendants.

Exempt from the definition of a domestic work employee are parents, grandparents, spouses, siblings, children, or legally adopted children of the domestic work employer, and any person under 18 years of age who is employed as a babysitter for a minor child of the domestic work employer.

The definitions could still capture the work that my kids did for others around the neighborhood - and that may be a problem, but not necessarily so.

For instance, existing law would still penalize me as a domestic employer of the local 15 year old kid if I didn't provide him or her (other than for baby sitting) with required work notices about wages and hours. Heck - we violate these laws all day long, every day and no one is worse off for the wear.

It's kind of like speeding on the freeway - the limit is 65 mph, but traffic moves along quite nicely (okay, not in Los Angeles) at 75 and if no one is driving like a maniac then enforcement is lax. When someone is weaving in and out, causing a nuisance or safety hazard then the constabulary takes notice and those dreaded lights atop a black and white draw attention to the situation to the chagrin of the maniac.

Relative to injuries, if you own your home, then presumably your homeowner policy should cover these domestic employees because of the work comp provisions in those policies. But if you're a renter without rental insurance (a very large population) then you risk some nasty labor enforcement action by the Department of Industrial Relations unless you spend the estimated $2,000 per year to buy a comp policy - that ain't happening!

On the flip side, domestic employees are at the bottom of the totem pole in the employment law protection scheme and they ARE taken advantage of by unscrupulous business people. I understand that this class of workers deserve the same protections against abuse as other workers in the state.

So the bottom line - I'm not entirely against the concept of AB 889. I just think the definitions need to be refined a bit so that us "domestic employers" don't unwittingly violate labor laws by hiring the local kid on a regular basis to mow the lawn.

I don't believe the general press completely understands this law, and perhaps they haven't even read it and are feeding the maelstrom of objection through vicarious reasoning.